General partnership (VOF)

What is a VOF or general partnership?

A general partnership is also sometimes called a commercial partnership. It is a company in which at least 2 people or organisations work together under one business name. Every person or organisation who takes part is a co-owner. The co-owners are known as partners.

• The partners share the profits and pay income tax on them.
• Each partner contributes something (money, goods, or labor).
• Partners are personally liable with their own funds for any debts incurred by the VOF.
• There is no minimum amount required to start a VOF.

Setting up a VOF

You register your VOF with the Netherlands Chamber of Commerce (KVK) yourself:

1. Start the registration process online.
2. Make an appointment at a KVK office to complete the registration.

KVK will enter all the basic details, such as:

• the name of the VOF
• the VOF’s activities
• the names of the partners

You will pay a one-off registration fee

KVK passes on the details to the Netherlands Tax Administration

Are the partnership’s activities subject to value added tax (VAT)? If so, the partnership will receive VAT numbers from the Netherlands Tax Administration (Belastingdienst).

Register in the UBO Register

When you set up a general partnership you must also register the ultimate beneficial owners (UBOs) of the partnership. A UBO is someone who owns the organisation or has decision-making authority. You must register the UBOs in the KVK UBO Register.

Check who are the UBOs of your VOF

Set out the terms of your VOF in a partnership agreement

A partnership agreement is not mandatory, but it is advisable. This document sets out the terms of your partnership. For example:

• how much capital each partner contributes
• how you divide the profits
• who is authorised to do what

You can draw up a partnership agreement yourself or have it drawn up by a solicitor or notary.

Register your agreements with KVK

Take the general partnership agreement with you when you register with KVK. KVK will record some of the information in the Business Register, such as the purpose of the general partnership and the powers of the partners.

> Read more about partnership agreements

Make sure you keep proper records

You are legally obliged to keep business records. You can do this yourself or outsource it to a bookkeeper or an accountant.

Taxes

Income tax

Each partner pays income tax on their share of the remuneration or profit.

• If the Tax Administration sees you as a self-employed person for income tax purposes, you are entitled to the SME profit exemption (MKB-winstvrijstelling).
• If you also meet the hours criterion, you are entitled to further tax relief, such as the entrepreneur allowance (ondernemersaftrek).
• Starting entrepreneurs are also entitled to the tax relief for new companies (startersaftrek) in 3 of the first 5 years after starting.

> Read more about tax deductions and schemes.

VAT

The general partnership also pays VAT.

Liability for VOF debts

A general partnership is not a legal entity. This means that the partners are personally liable for any debts of the VOF with their own funds. Please note: you are liable for the debts of the entire VOF, even if they were incurred by another partner.

First, you should check whether you can pay off the debts using the VOF’s assets. If that is not enough, creditors are entitled to the partners’ private assets. All your assets count towards paying off the debts, including your savings and your home.

Debts and your partner

Do you have a partner? If so, your partner may also have to contribute to your debts. Whether your partner is also liable depends on the official status of your relationship and when you entered into it. With prenuptial or civil partnership agreements, you can prevent creditors from accessing your partner's money. The rules for a marriage and registered partnership are the same.

> Read more about your partner's liability

Personal debts do not affect a general partnership

Do you or another partner have personal debts? The creditor of these personal debts has no claim to the VOF’s assets or the personal assets of the other partners.

Joining later: liable for debts incurred previously

Are you joining an existing VOF? If so, check the financial situation first. A partner who joins the partnership at a later date is automatically liable for debts incurred before their arrival.

You remain liable for existing debts after leaving

Is a partner leaving? In that case, they remain liable for debts incurred whilst they were a partner. Here too, the partners may agree amongst themselves how to deal with the allocation and settlement of the debts. The partnership may also make direct arrangements with the creditor regarding this.

Filing financial statements

If all managing partners in your general partnership are foreign, you will have to file your financial statements with KVK.

Who can sign contracts?

Each partner is authorised to sign. This means that they may sign contracts or perform certain legal acts on behalf of the VOF, such as reporting a change in the Business Register. If you want to limit the authority of partners, you can make agreements about this in the partnership contract and the Business Register.

Authorising others to sign

A VOF can also give power of attorney to someone else. This person is then authorised to act on behalf of the company. It can be useful to register this person in the Business Register. This way your business partners also know who is allowed to act on behalf of the company.

Hiring personnel

If you choose to hire personnel, you have to pay payroll taxes and social contributions for your personnel. If you are hiring an employee for the first time, you must register as an employer with the Tax Administration. You must also report this to KVK. Read the step-by-step plan Employing staff in the Netherlands for more information.

Arranging social security

What are you entitled to?

As a partner in a VOF, you pay contributions towards the national insurance schemes. This means you are entitled to an old-age pension (AOW) when you reach retirement age. The AOW is a minimum income. You can arrange a supplementary pension yourself

If you are pregnant, you are entitled to maternity benefit for a minimum of 16 weeks. You can apply for this via the Employee Insurance Agency (UWV). > Read more about the rules and conditions.

What are you not entitled to?

Because you are not an employee, you are not entitled to any of the benefits available to regular employees, such as sickness, unemployment or disability benefit (ziektewet, WW and WIA respectively). It is up to you to take out disability insurance as soon as you start your business.

Health insurance is mandatory and basic cover is sufficient. You pay a premium to your health insurance company and a contribution as part of your tax return.

Depending on your type of business, it can be wise to also take out other types of business insurance.

Ending the VOF

If the general partnership is ending, you must deregister it from KVK. You must also settle your accounts with the tax authorities.

Please note: do not simply deregister the VOF. If you do, you will, for example, no longer have access to your business bank account. Read more about ending a VOF.

What happens if a partner leaves or dies?

In that case, you must wind up the business and the partnership will cease to exist.

Do you want the VOF to continue after a partner leaves or dies?

Arrange this in the partnership agreement with what is known as a ‘survival clause’ or ‘takeover clause’. This means that the remaining partner or partners take over the share of the partner who has left or died. In the agreement, you set out, amongst other things, who is entitled to what, how you will determine the value of the business, and how you will distribute it.

The VOF can then continue in various ways:

• as a general partnership with a new partner
• as a sole proprietorship

If the VOF continues with a new partner, you must update the details with KVK:

• the partner leaving must deregister
• the new partner must register
• both partners must also deregister and register in the UBO register

You must also amend the partnership contract.

Do you want to convert the VOF into a sole proprietorship?

Do not deregister the general partnership separately; instead, submit all changes at the same time.

On kvk.nl, you can read how to convert the VOF into a sole proprietorship.

Do you want to convert the VOF into a private limited company (BV)?

One of the differences is that the private limited company will then be responsible for the business. And therefore also for the financial affairs and any debts. To convert a VOF into a BV, follow the same steps as for converting a sole proprietorship into a BV.

Note: Be aware that for tax purposes, the Tax Administration views changes in legal structure as ending one business and starting another.

VOF between partners

You can also set up a general partnership with your partner. Thid is known in Dutch as a man-vrouwfirma. If the Tax Administration wiews both partners as self-employed, this results in a double tax benefit. You are both entitled to various exemptions and tax deductions.

The disadvantage of a general partnership between partners is that both partners are liable with their personal assets. Prenuptial agreements generally have no effect in the case of a VOF between partners.

The Tax Administration inspects man-vrouwfirma's very closely to check that both partners are actually active in the business for tax purposes. Both partners' involvement and input in the business have to be on an equal level.